The objective of my first Budget was to rectify and strengthen our balance of payments. This was done. The tasks for the 1953 Budget were to continue to fortify our overseas account and to seize every opportunity for expanding production at home. In the last Budget we restored initial allowances, to encourage investment. We reduced taxes, to increase economic incentives and to stimulate demand and production.

But since our balance of payments, though it had improved, was still insecure, and since we could not risk any renewal of inflation, I decided that there must be limits to the extent to which we could deliberately expand the economy. We had to steer a middle course. Looking back over 1953, I think we can fairly say that our policy has been justified by events. In that year industrial production reached heights never before recorded in our country's history.

A year ago I told the Committee that the sterling area must as a whole be at least in balance with the rest of the world. As the Committee already knows, the sterling area converted a huge deficit in the year ending 30th June, 1952, into a surplus of over £400 million in the following year. This was a remarkable achievement, of which we members of the sterling area, who gathered together recently at Sydney, felt justly proud.

This recovery was due mainly to the adoption of sound internal measures. But it was also, in part, due to the drastic import restrictions imposed by all sterling area countries following the crisis of 1951. As these emergency restrictions are, rightly, being removed, we must expect the surplus to fall from this high rate, especially in the second half of the year, which for seasonal reasons is usually less favourable to the sterling area's earnings, and also contains the capital and interest payment on our debts to Canada and the U.S.A. The surplus in the second half of 1953 has now been provisionally estimated at about £100 million, and for the year as a whole at some £320 million.

As a result of the sterling area's achievement, the gold and dollar reserves rose during 1953 by £240 million, to a total of £899 million. The Committee should know that in the first quarter of this year the reserves rose by another £60 million. The result was that at the end of March they stood at £959 million. Here, too, we may feel modestly satisfied—but not complacent. The level of £959 million is a little more than half as much again as the lowest figure to which the reserves fell in 1952; so that there is a long way to go before they reach an adequate level.

The United Kingdom's own balance of payments with the rest of the world yielded a surplus of about £225 million on current account in 1953, after receiving about £100 million of aid from the United States. In the second half of the year, our total current surplus had risen to an annual rate of £300 million, after taking account of U.S. aid.

One of the most significant developments affecting our own balance of payments has been the further movement of the terms of trade in our favour. One result of this has been—and the Committee should have all the facts placed before them—that during 1953 the United Kingdom was able to buy a volume of imports 9 per cent, higher than in the previous year at 4 per cent, lower cost. This has been a considerable help to us. But we must also remember—and this is sometimes forgotten—that a movement of this kind also tends to reduce the purchases of some of our best overseas customers from us.

I shall have more to say later about our export performance, but I would simply note here that we cannot expect to enjoy both favourable terms of trade and easy export markets at the same time. It is, therefore, encouraging to record that we increased our exports to those areas, particularly North America and Western Europe, where economic activity remained high and trade was not beset by import restrictions. Some countries in the sterling area found it possible to relax their restrictions during the year, and have made progress in this direction since our talks at Sydney. Our exports have responded to this treatment.

Meanwhile we have to note the manifest increase in the confidence which the world has placed in sterling. This is shown by the strengthening of the reserves, the marked strength of the sterling-dollar rate, and the small gap, over a long period, between the official sterling rate and the unofficial rates for transferable sterling. This confidence has enabled us to make two important moves forward towards a freer system of trade and payments. One is the unification of what is called non-resident sterling and the other is the re-opening of the London gold market. We hope and expect that this will increase still further the strength of sterling and the world's use of it. Certainly the first reactions to these moves have been cheering.

What is more encouraging is that we have been able to combine this external progress with a considerable expansion in production and improvement of living standards at home. Over 1953 as a whole industrial production was 6 per cent, higher than in 1952. This increase has continued into 1954. This welcome surge forward is partly due to a natural reaction from the period in 1952 when consumers' expenditure was abnormally low and investment in stocks had been cut back. The resumption of investment in stocks accounts for some of the increase in production.

But the recovery has also been due to some more fundamental influences. Nearly half the increase in industrial production was brought about by higher investment and higher defence expendi- ture. Personal consumption, assisted by the tax concessions which we made last year, also rose in volume, by about 4 per cent, over the previous year. It has sometimes been said that this increase of personal consumption is a sign that we did, after all, overdo things last year; even that we brought back inflation.

For my part, I take pride in the increased freedom of choice which the citizen now feels that he can enjoy in his or her daily life. The truth is that we must not be frightened of a little more ease and happiness or feel that what is pleasant must necessarily be evil. We must realise that we shall be able to increase our standard of living through an expansion of production only if that expansion is a balanced expansion, benefiting each sector of the economy, including personal consumption, in its proper degree.

In the earlier part of the year exports contributed little to the growth of production; but in the later months they increased more rapidly than production, and outstripped the increase of home demand, so that by the end of 1953 the volume of exports was 10 per cent, higher than it had been a year earlier.

The expansion in output has been accompanied by a high and stable level of employment. The total of unemployed in Great Britain fell from 453,000 in January, 1953, to 373,000 in January, 1954. At the same time, unfilled vacancies rose from about 230,000 to 270,000. So it can be said that, broadly speaking, there are, at the moment, neither too many workers for the jobs, nor too many jobs for the workers. Moreover, output rose a good deal, and rose more than employment. This recovery in productivity marked a return, in most industries, to the 1951 level.

The resources at our disposal were, of course, enlarged not only by this rise in productivity but also by the improvement in the terms of trade, whose support to our external balance of payments I have already mentioned. We have been asked what advantage we have to show at home from the improvement in the terms of trade. This is the answer to that question. In brief, these improved terms have enabled us to increase our imports of food and raw materials, without impos- ing a corresponding extra strain on our balance of payments or our reserves, in spite of the fact that exports were, unfortunately, slow to increase. This made it easier for our economy to carry its heavy burdens, including the defence programme; and it also contributed, together with our sound financial policy, to the welcome stability of prices throughout the year.

The developments which I have described are encouraging, but it will be our duty today and during these debates to search out the less satisfactory features of 1953. That is what I did over the last year and then diagnosed as a result. In my last Budget Statement, I pointed out the decline in production in 1952 and recommended means of dealing with it. This year I point to productivity. We cannot be complacent about its increase, when we remember that output per man in manufacturing industry in 1953 was, on the average, little above the 1951 level and that our rate of increase is far too often below that of our overseas competitors. I point also to exports. These have expanded over the year, as I have shown, but we need to obtain a substantially larger volume of exports if our balance of payments is to be secure.

Moreover, taking the year as a whole, there has been an insufficient increase in investment in private manufacturing industry. It is true that the volume of fixed investment increased in 1953 by about £200 million. But most of this was accounted for by the larger number of new houses built, and virtually all the rest by higher investment by the basic industries. The level of our industrial investment is still too low; it is still too far below the corresponding achievement in the United States, and the trend compares unfavourably with the effort of some other countries, who are becoming our keen rivals in world markets. The moral for ourselves is serious; and I shall have more to say on this subject at a later stage of my speech.

In framing plans for next year we must therefore start from this simple truth. Our objective is expansion without inflation. If we are to achieve this, we must continue to raise productivity, to expand exports, and to increase productive investment. So much for the Revenue and how we got along last year.

I will now summarise the main items of the Exchequer Accounts in traditional manner for the past year. Total revenue amounted to £4,368 million. This, I may point out, is, in total, exactly the figure I forecast, though a suitable sense of modesty compels me to admit that it is not composed exactly as I thought it would be.

Inland Revenue duties amounted to £2,340 million against the estimate of £2,436 million, that is £96 million less. The shortfall occurred in Income Tax, Profits Tax and Excess Profits Levy, and was primarily due to the fact that company profits in the textile and allied trades declined as a result of the 1952 recession rather more than we could foresee. In addition, the suspension of initial allowances from April, 1952, produced a somewhat smaller increase in revenue than we had hoped. On the other hand, the general buoyancy of the economy in 1953 was reflected in an increase in the value of Stock Exchange securities and other property, with the result that the yield of both Death Duties and Stamp Duties was larger than the estimate. The yield of Surtax was also slightly greater that was expected.

But if Inland Revenue fell short of expectations, Customs and Excise Duties exceeded them. The total yield of these duties was £1,764 million, or £39 million more than the estimate. Tobacco yielded £627 million, or £12 million more than the estimate. Beer, wines and spirits, as usual, returned a score second only to tobacco, providing £383 million or £11 million more than the estimate. Import Duties yielded £54 million or £16 million less than the estimate. Purchase Tax produced a total of £299 million, no less than £39 million over the estimate.

Non-tax revenue yielded more than the estimate. For example, receipts from Sundry Loans amounted to £38 million, compared with the forecast of £25 million, practically the whole of the difference being accounted for by an advance repayment of part of our wartime loans to the Netherlands Government. Miscellaneous Revenue has produced £136 million, or £41 million more than the Budget estimate, an increase largely due to the trading surplus of the Ministry of Materials.

Now for expenditure. Consolidated Fund Services, at £674 million, were £1 million more than I estimated in the Budget. Expenditure on Supply Services was forecast at £3,586 million, and amounted, in fact, to £3,600 million. This was only £14 million wide of the estimate. But, considered separately, the elements of this total, defence expenditure and expenditure on civil supply, took different courses.

I estimated defence expenditure at £1,497 million, after allowing for £140 million of appropriations in aid from the sterling counterpart of economic aid from the United States. In fact, expenditure on defence amounted to £1,365 million, or £132 million less than the estimate, in spite of the fact that the appropriations in aid from sterling counterpart were £125 million, or £15 million less than the forecast. There are many reasons for this shortfall, but perhaps the most important is the slower rate of deliveries of certain items of defence equipment, slower than we had allowed, or, indeed, hoped for, in the past year.

Civil expenditure, on the other hand, at £2,235 million, was £146 million more than the Budget estimate. The Committee have already seen details of the supplementary provisions which cause this excess; it consisted mainly of the additional requirements of the Ministry of Food and of the Ministry of Agriculture and Fisheries for the support of home agriculture, for the financing of sugar stocks, and for flood relief.

The total expenditure under all heads amounted, therefore, to £4,274 million, against my estimate of £4,259 million, an excess of £15 million.

My Budget estimate, the Committee will remember, was a surplus above the line of £109 million. The actual result was a surplus of £94 million, within £15 million of the estimate. Below the line, we have done better than the estimate as regards both receipts and payments. On the receipts side, we have had £42 million in repayment of advances from the Raw Cotton Commission, compared with the estimate of £10 million; and on the payments side, we have issued £299 million by way of loans to local authorities, compared with the forecast of £400 million.

As the Committee know, this does not mean that the local authorities have reduced their capital expenditure. On the contrary, they have energetically maintained their investment in houses and other capital assets. It does mean that they have also shown energy and skill in raising their capital from outside sources. It is now 15 months since they were given their freedom to raise loans in the stock and mortgage markets, and from other non-Government sources. The figures show that many of them have made good use of their opportunities; and their action has assisted the Exchequer. This is a movement that I expect to continue, as the Committee will see when I come to my estimates for the year ahead.

In all, therefore, as compared with the estimate of £549 million for total net outgoings below the line, the actual figure was £391 million, or a saving of £158 million. Thanks to the fall in payments below the line combined with the surplus above the line, the net overall outgoings have been reduced to £297 million.

This sum has, of course, had to be met by Exchequer borrowing. The National Debt at 31st March last stood at a total of £26,583 million, an increase of £531 million over the year. The main factors contributing to the increase are, first, the net Exchequer outgoings, which I have already mentioned, and, second, the transfer to the Treasury, under the Iron and Steel Act, 1953, of liability for £244 million of British Iron and Steel 3½ per cent. Guaranteed Stock. The Committee will, of course, also remember that the Act transferred the securities of the nationalised companies to the Holding and Realisation Agency. The Debt was also increased by the issue of £47 million of Coal Compensation Stock, which is likewise balanced by the corresponding liability of the National Coal Board to the Exchequer.

The state of the Debt reflects also, of course, our satisfactory progress in dealing with our obligations which matured during the year. We converted no less than …552 million of 1¾ per cent, serial Funding Stock, 1953, and £738 million of 2½per cent. National War Bonds, 1952–54, into securities maturing in later years. No more than £96 million of the £1,386 million of the two original loans remained to be paid off on maturity. New issues in the year consisted of a second tranche of £100 million of 3 per cent. Exchequer Stock, 1960, and £341 million of a new 3 per cent. Exchequer Stock, 1962–63. I will not detain the Committee further with details of the Debt. The other changes in its composition will be seen in the Financial Statement.

It is right, however, that I should at this point acknowledge the valuable support which the Exchequer received in 1953 from the National Savings Movement. I assure their leaders and voluntary workers that the Exchequer has benefited greatly from their support, and that they have made a notable contribution to our economic stability. They have brought us good tidings. The National Savings record shows that in the last three months new sayings exceeded withdrawals by £40 million; that is £30 million better than in the same period last year. The savers must not relax in the coming year. A Budget cannot succeed by fiscal measures only; and I rely on the skill and enthusiasm of the Savings Movement to continue to encourage personal savings, guiding the money into National Savings securities to the advantage of the State and of the savers themselves.

That, I think, is sufficient of figures for 1953–54. But in bidding farewell to that year, I think I may claim that its results, as I have tried to summarise them, provide ample justification of the policy on which last year's Budget was based. The success of a Budget should be judged, not by the narrow arithmetic of the Exchequer accounts, but by its wider effects on the economy. What were these effects?

Production has expanded; we have reduced taxes and enjoyed an increase in consumption, the benefits of which have been very widely spread; our external balance of payments and our gold and dollar reserves have been strengthened; the economy has been able to respond rapidly to the revival of export demand as it occurred in the later part of the year; we have enjoyed greater stability of prices; and we have been able to free from control many commodity and agri- cultural markets. Indeed, the fact that we have been able to foster expansion and go ahead with decontrol without a general rise in prices shows that we have held a fair balance between inflation and deflation. That, I suggest, is not a bad record of a year's voyage. It is a fair indication that, after the measures which we took 12 months ago, the ship really did make good progress and get out of slack water. But I have not shirked the problems which 1953 has still left us to face, and we had better now examine, first, the arithmetic, and then the wider prospects of the year ahead.

In looking at the prospects for 1954–55, let me begin with the conventional above the line Budget, in ordinary Exchequer terms.

I estimate that revenue on the basis of existing taxation will amount to £4,537 million, an increase of £169 million over the out-turn in 1953–54. Inland Revenue duties in 1954–55 are expected to yield £2,385 million, an increase of £45 million compared with the out-turn for 1953–54. This increase is wholly attributable to Income Tax, from which I expect to collect £1,800 million, or £69 million more than last year. This is partly due to the recovery in profits during 1953 and partly to increases in wages and salaries. The increase is after allowing for the cost— about £50 million—of the restoration of initial allowances, which I announced at this time last year.

Profits Tax, on the other hand, is expected to yield only £172 million this year, a reduction of £16 million compared with 1953–54. This is because part of last year's collection consisted of arrears of tax at the higher gross rates applicable up to the end of 1951. I put the yield of Excess Profits Levy in 1954–55 at £60 million—a fall of £6 million on the previous year; and the yield of Surtax at £132 million, or approximately the same as the 1953–54 out-turn. Death Duties at £165 million, Stamp Duties at £55 million and Miscellaneous Inland Revenue duties at £1 million are also expected to bring in about the same amount as last year.

I put the revenue from Customs and Excise duties on the existing basis of taxation at £1,785 million in 1954–55, compared with £1,764 million last year. The principal items in this total are: tobacco, £633 million; beer and other alcoholic drinks, £381 million; oil, £300 million; Purchase Tax, £295 million; Import Duties, £56 million; entertainments, £44 million; and betting £30 million.

Allowing for a small increase of £4 million in the yield of motor duties, I estimate, therefore, that total tax revenue will amount to £4,247 million, an increase of £70 million over the corresponding yield last year. From non-tax revenue I also expect a considerable increase—£4 million more from broadcast licences, a result mainly of the higher charges which were announced a month ago; and £109 million more from Miscellaneous Revenue, which reflects, among other things, the proceeds of the expected liquidation of trading stocks by the Ministry of Food, and brings the total of Miscellaneous Revenue up to £245 million.

I put total expenditure above the line for 1954–55 at £4,523 million, an increase of £264 million on the original estimate for 1953–54. This, of course, allows for the reduction in the Ministry of Food Estimate as a result of the Annual Review of agriculture and the consequent price settlement. Consolidated Fund Services amount to £667 million, or £6 million less than last year's estimate. They need, I think, no detailed comment.

There is no change in the amount provided for the service of the Debt, but I do propose to alter the form in which that provision is made. Ever since the Finance Act of 1928, this has been the Permanent Debt Charge, which was a sum fixed in advance to cover the service and reduction of Debt over a period of years. But every year Parliament has authorised, instead of the sum prescribed in 1928, the actual amount required to service the Debt in the coming year. The fact is that the growth of the Debt, particularly during the last war, has made the existing provisions for the Permanent Debt Charge ineffective. I propose, therefore, to repeal them, and so bring the law into accord with the established practice.

The increase of total expenditure over last year is more than accounted for by Supply Services. Defence expenditure at £1,555 million, as compared with the £1,497 million estimated a year ago, rises by £58 million. Civil expenditure at £2,301 million shows an increase of £212 million over last year's original estimate of £2,089 million. In sum, therefore, the above-the-line account shows a surplus of £14 million.

To complete the picture in broad outline, I need only mention that the below-the-line estimate shows an increase of £16 million in the provision of capital for the National Coal Board; a reduction of £52 million in the provision for War Damage, partly due to the clearing up last year of the Business Scheme; and, in the light of last year's experience, a reduction of £100 million in the provision for loans to local authorities. We may also have to finance certain compensation payments under the Town and Country Planning Bill now before Parliament; but it is too early to name a figure for them. After allowing for the offsetting receipts, I put the net payments below the line at £388 million.

Such, then, in outline, is the Budget picture for 1954–55 on the existing basis of taxation. Its essential features are revenue of £4,537 million, expenditure of £4,523 million, and a small surplus of £14 million above the line.

The Committee will see that we have before us, therefore, the picture of a Budget broadly in balance—the picture of a Budget which showed a moderate surplus on last year's out-turn and seems likely to show a virtual equilibrium in the year which lies ahead. This is not a bad record for a country which has been carrying a defence load double that of five years ago and an ever-enlarging system of social services.

What then, shall be the pattern of this year's Budget? Are we to leave things as they are, or are we to make changes this way or that? The measures proposed in last year's Budget seem still to be working themselves out broadly according to plan, and to be providing the right sort of general climate in the economy. So far as I can judge, they are likely to continue to do so, and they ought, therefore, to be given more time to produce further beneficial effects.

But I must remind the Committee of some powerful forces of wind and weather which may well blow us off course. Three of them are very much in my mind—the more so since they are by no means wholly under our own control. The first is the formidable mass of Government expenditure. The second is the level of world trade, and of our own share of that trade. The third is the possible effect on the sterling area and ourselves of the current decline in American production. I will examine these in turn.

I will take Government expenditure first. The continuing rise in Government expenditure is serious enough in itself. On the income side we must recall that by next year most of the revenue from the Excess Profits Levy will have ceased, and we shall no longer be able to count on a large receipt from the sale of food stocks. We must also face a considerable reduction in U.S. aid which we have got used to appropriating in aid of our defence expenditure—and exceedingly grateful we are for it. The hard truth is that, much as we all want greater relief from taxation, even our present high rates will not save us from a serious threat to the balance of future Budgets if the growth of expenditure is not controlled. Of course, that balance may be disturbed by causes other than a rise in expenditure and an ending of particular receipts. If, for example, trade slackens, owing to a recession either here or overseas, the effects will be reflected in the revenue figures, mainly in the following year. Thus a slackening in economic activity may also lead us to a Budget deficit.

The aim of the Budget must always be to maintain the balance of the economy as a whole, whatever the mathematics above or below the line. Its aim, in short, must be to maintain employment, as indeed we have done, to encourage production, which we have done, while avoiding inflation, which we have done, and ensuring a healthy balance of payments, which we have succeeded in doing. The realities of our situation may therefore call either for a surplus or a deficit on the conventional Budget.

But these general considerations provide no excuse for not adopting a strict and sober attitude towards Government expenditure. The claims of the Government on the national resources leave us far too little freedom of movement for economic health. In the past year we have secured substantial administrative economies, particularly as a result of staff reductions made possible by decontrol. We shall continue to make these economies wherever we can. But they do not, in themselves, suffice to offset the increases hi expenditure which are dictated by considerations of policy. This is strikingly true of the three major heads of expenditure—defence, food and agriculture and the social services.

Defence expenditure, before crediting United States aid, is estimated at £1,640 million, or roughly the same as the corresponding figure in the original Estimates for last year. But the budgetary support from American aid is expected, this year, to be only £85 million, as compared with £140 million for which last year's Budget could take credit. The net cost of defence to the Budget this year will, therefore, be £1,555 million, as compared with £1,497 million 12 months ago —the increase of £58 million which I have already mentioned. Moreover, our defence commitments impose a considerable strain on our balance of payments. The overseas element in defence expenditure is probably at least £350 millions a year.

The general policy governing our Defence expenditure this year has already been explained in the White Paper "Statement on Defence, 1954." I shall not go into it in detail again but, as that White Paper said,

"It will be the Government's aim to take advantage of all new developments which appear likely to increase fighting strength and to promote economy of effort."

We must be up to date; but we must have economy too. During the coming year we must see to it that we obtain some definite relief from the Defence burden.

Now for the outlook in food and agriculture. On food there is expenditure of £229 million and, as I have already indicated, revenue which amounts to £110 million. This year consumer subsidies will apply to milk and bread only, at a cost of about £87 million. This is, as the Committee will have noted, very broadly the expense to the Exchequer resulting from the fixing of consumer prices insufficient to cover costs. The reduction of the scope of the consumer subsidies has, of course, widened the area over which assistance to our agricultural policy is given in the form of direct undertakings to producers.

Agricultural guarantees in this year's Estimate amount to just over £150 million. The total provision which corresponds to what we have hitherto called food subsidies—that is, it includes the welfare subsidies and such of the production grants as have hitherto been included in the total of food subsidies—is £325 million. We intend to carry out our undertakings to the farming community to maintain a system of guaranteed prices settled at the Annual Review.

Last year's experience has given both the farmers and the Government a good deal to think about—notably the fall in market prices abroad and at home, the return of plenty, and the curious effect of abnormally warm weather at seasons when the wit of men had fixed a price to suit a cold climate. In fact, the hens simply would not graduate in any of our schools of political economy. The Government and the farmers have therefore been conferring together on a variety of schemes designed to reconcile two needs —the need to secure a greater measure of financial control and the need to preserve the broad stability of the farming industry. The introduction of Deficiency Payments Schemes is an improvement, but our arrangements will have to vary from commodity to commodity.

We may, for example, quantify or limit the extent of Exchequer help to a particular commodity. Thus the guaranteed price may be related, in the words of the recent Annual Review White Paper,

"to levels of output of particular commodities, as in the case of the new financial arrangement for milk ";

or there may be an arrangement for sharing some part of the effect of changes in market prices. But I am sure that in one way or another we must establish, in consultation with the farmers' representatives, some limit to the open-ended Exchequer liability. Of this we shall hear more during the year.

The next large group is that if the social services. The provision here amounts to no less than £1,327 million— an increase of £63 million over the corresponding provision in the original Estimates for last year. It takes the whole of the taxes from tobacco, beer, spirits and Purchase Tax to cover this total.

Of this increase of £63 million, the Education Departments, which rise from £259 million to £279 million, account for £20 million. This is largely due to the increase in the school population and in teachers' salaries. Housing subsidies account for £10 million, increasing from £70 million to £80 million. This illustrates the cost to the Exchequer of the success of the Government's housing policy. The National Health Service has gone up by £19 million, from £411 million to £430 million. National Assistance accounts for another £5 million by a rise from £128 million to £133 million; and Exchequer contributions to local revenues for a further £9 million, with an increase from £68 million to £77 million.

I think even hon. and right hon. Members opposite will agree with what I am about to say now. It is quite clear that progress in social reform, far from being neglected by this Government, has been well maintained. It is equally clear that this progress carries heavy obligations with it and that there is no miraculous and painless escape from these obligations. We cannot, in good conscience, put the clock back; but we must make sure that in the administration of this vast outlay humanity goes hand in hand with economy.

I am not unmindful of the many other claims on the Exchequer, which the Government would wish, in equity, to satisfy. Some of these—for instance, the problems of the old people—are very much in the minds of every Member of this Committee, not least myself. But I have described the already heavy and growing burdens on the Exchequer and I must say this to the Committee: that I cannot bring my conscience to sanction further advances in social reform, involving increases in public expenditure, until we have the growth of our existing commitments well in hand. Only then can we make further progress in meeting some of the claims which are pressing upon us.

My right hon. Friend the Minister of National Insurance, and indeed the whole Government and all Members of this Committee, have continually in mind the needs of the old people. But no one who reflects for a moment on the immense burden which the working population, and particularly the younger generation, will have to carry in the interests of elderly retired people, could think it right to reach a decision about the future welfare of the old without the fullest consideration of the effect on the cost which future generations will have to meet. This is the year in which a review of the National Insurance Fund is taking place —the first comprehensive review under the new legislation. Moreover, the Phillips Committee is investigating the problems of an ageing population. It will be useful to have the results of those reviews. But our urgent task, in the interests of the old, is to ensure that the outlook for public expenditure as a whole is less menacing than it is at present.

Another reform which is also very much in our minds is that of equal pay for equal work. In fact I was serenaded here this afternoon with the familiar tune of "Equal Pay." There has been a development. Leading staff organisations in the public services have now circulated a statement to right hon. and hon. Members in which they ask me to authorise "talks which will result in agreed steps for introducing equal pay." I certainly think that a gradual solution of this problem will prove to be the right one; and so far as the Civil Service is concerned— for which alone I can speak as an employer—I should like shortly to meet the National Staff Side representatives myself and discuss with them the manner in which we are most likely to make progress and the basis upon which further Whitley talks should rest. But here, too, of course, I cannot ignore the prospects for the Exchequer as I have described them.

I have said enough to illustrate the magnitude of the burdens which will fall upon the Exchequer in the current financial year and in the years ahead. It is an essential part of my Budget statement this year that I should make this warning clear. If—but only if—we control expen- diture, and increase the national product at a faster rate than the growth of our commitments, can we afford the benefits which that expenditure confers on us.

Our first task, then, is to control our expenditure at home. But I come now to the other purpose which I mentioned and which I now examine. The aims of the Budget must take account also of our liabilities overseas. The internal expansion which the Budget fosters must be one which reinforces our external balance of payments as well.

There is no need for me today to dwell at length on the vital need to maintain confidence in sterling, of increasing our gold and dollar reserves without accumulating corresponding short-term debts, and of winning a surplus which will enable us to make a worthy contribution to overseas development. I was most deeply impressed, during my recent visit to Australia, by the extent to which the members of the Commonwealth look to us for a lead in developing their and our vast resources. This is the true and up-to-date conception of Commonwealth unity in the economic sphere. These purposes compel us to do all we can both to increase our earnings, particularly from exports, and to enlarge the volume of world trade and the freedom of currencies, especially sterling.

I said just now that we had to increase the national product. There is one particular aspect of our policy which I must mention today, namely, finance for exports. There have been complaints from time to time that British manufacturers are being unduly handicapped in many cases by having to finance, either from their own resources or from such credit as they can raise, any credit which they themselves have to give in order to secure export orders for capital goods.

We have decided, therefore, that henceforward, the Export Credits Guarantee Department will make rather freer use of guarantees to the banks for major capital goods exports—for those goods which are one of the most valuable types of our traditional exports and which I found on my tour are of particular importance for overseas development. To the extent to which such a guarantee is given the City will find the finance, from the stage of accept- ance of the goods, without recourse to the manufacturer himself. For the time being a limit of up to 85 per cent, of the credit given to the overseas buyer, instead of the 90 per cent, usually available under an ordinary Export Credits Guarantee Department policy, will be set in those cases where this procedure is used. We shall review this in the light of developments, and meanwhile I hope the arrangement will help our exporters at an important point.

But any initiative of this kind which the Government can take can only support and reinforce the efforts which industry itself must make to increase output and to capture foreign markets. And here industry must combine enterprise with restraint. It must be enterprising in the vigour and imagination with which it meets the challenge of sharpening competition; it must be restrained in the extent to which it loads the final price by its demands for wages and profits. We are near the point—and in some cases we may have passed it—where further increases in wages and profit margins will price us out of our export markets. All-round increases in wages have clearly played a large part in the upward movement of prices since 1945. Both stability at home and competitive power abroad require that wage increases should not outrun productivity; any improvement in productivity should show itself also in the form of lower prices.

But, for the reasons which I have often given, industry must also beware of excessive distribution of profits. In all these questions we do better to rely on voluntary moderation than on any form of compulsory limitation. But at no level of the industrial process can we afford either denial of personal effort or indulgence of personal motives, if, in the sharply competitive world which we now face, our exports are to maintain and to expand their share of world trade.

Our task will be all the easier if world trade itself expands. Since the meeting of Prime Ministers on economic policy at the end of 1952, the Commonwealth as a whole has been working steadily to enlarge the volume of international trade and commerce. We have sought to do this in company both with the U.S.A. and with Europe.

My right hon. Friend the Foreign Secretary and I explained our policies both in Washington and in Paris early in 1953. We now have good reason to be glad that we took this initiative, because since then, we can look back on steady progress and on a general move towards more liberal trade and financial policies in the major trading countries of the world. Moreover, the Committee will, no doubt, have read the Randall Commission Report in the United States and the Message which President Eisenhower has recently sent to Congress.

It is not for me to prejudge or predict the action which the Congress may see fit to take. But I am encouraged, and I think that the Committee will be encouraged by the spirit of the President's message, and by his clear recognition that the United States has a vital interest in working towards the removal of restrictions on trade and towards the convertibility of currencies. This declaration of the Administration's attitude towards its long-term external economic policy is particularly heartening at a time when the current state of the United States economy is one of temporary decline— a decline on which the Committee will expect me to comment for a moment if we are to have a clear idea of what weather we are moving into this year.

So far production in the U.S.A. has fallen about as far as it did during the recession of 19487ndash;49; and we do not know whether it will fall further before it recovers. The sterling area could be affected in two ways. It might suffer some direct loss of dollar income; or, if a fall in activity in the United States were to lead to a reduction in commodity prices, a decline in prices and in comes might result in a general fall in trade and activity.

At Sydney, in January, the Commonwealth Finance Ministers were unanimous that we should try to ride the inevitable fluctuations of world trade without a return to restrictions on trade and payments. We also agreed that if all played their part in endeavouring to maintain a high level of trade, activity and employment—and it seemed reasonable to assume that they would—a moderate decline of activity in the United States could be prevented from having serious repercussions elsewhere. The implications of the present decline in United States activity for the rest of the world must, however, be closely watched. A Chancellor of the Exchequer is liable to have held against him any views which he may voice, however carefully he may qualify them. But I think it my duty to the Committee to give my impressions on this subject.

My own opinion, then, is that business confidence, both in the United States and elsewhere, has been remarkably robust, and that the decline which has taken place has been so orderly and gradual as to support the view that the recession is predominantly due to stock—or as the Americans call them, "inventory "— adjustments. A decline so caused should be self-correcting if there are no secondary effects, of which as yet there is little sign. If, however, secondary effects should begin to show themselves, then I believe that the United States Government would take steps to check any serious decline, just as I would expect any Government in this country, faced with similar internal developments, to take such steps. In short, while I believe that we should be prepared for any changes, I think that neither the facts up to now, nor the balance of probabilities, should lead us to expect the worst.

The world-wide damage caused by some previous recessions has been due mainly to the cumulative effects which a contraction of economic activity in any one sector exerts, with multiplying force, as its centre of infection spreads. But the effects of the current decline on the rest of the world have so far been much less severe than previous experience would have led us to expect. There are two reasons for this. The effects have undoubtedly been softened by the continued flow of U.S. military and other expenditure, and by the remarkable stability of commodity prices generally. But a good share of the credit is due to the policies adopted by the Sterling Area as a whole, following our various Finance Ministers' meetings, to check inflation and to promote sound development. In the event, progress in the sterling area has so far been slowed down rather than halted or reversed. Exports to the dollar area have shown some reduction; but our central reserves, along with those of many other countries, are still rising.

The Committee will no doubt have been heartened, as I was, by the increase in the gold and dollar reserves in March, the largest increase that we have had for a year. But this does not justify our discounting the various forces which, as I have explained to the Committee, may develop to the damage of our external account. It may be only in the second half of the calendar year that their effect will be felt; and it is then, in any event, that we normally have to face seasonal pressure against the balance of payments, of both the United Kingdom and the whole sterling area, with the rest of the world. Our best insurance against any such risk is to be prepared to take action, if necessary, both internationally and at home. Overseas, we must act, together with our friends and the great organs of international economic co-operation, to maintain our mutual credit and trade. At home we accept the responsibilities, defined in the White Paper of 1944, to keep up employment and, with due regard to the needs of our balance of payments, to use our resources to the full. Nor should I hesitate to reconsider my budgetary policies if I thought that this was required. We should therefore view the future with resolution rather than despondency.

I must now make my judgment of the prospects for 1954 as a whole. Although what happens in other countries may affect us vitally, it is the level of our internal demand which exerts the major influence on the course of production in this country. Speaking now in the broadest terms, it is my view that the general level of demand should be well maintained.

Let us look at the main elements of demand at home. In real terms, Government expenditure on goods and services in 1954 will be rather higher than in 1953. The volume of consumers' expenditure also is likely to be higher in 1954 than during 1953 as a whole. As for fixed investment, work on new housing is expected to be about the same as in 1953, while the investment of the nationalised industries, both in buildings and in plant, should show some rise. These increases in demand will give considerable support to the course of production this year. Exports will depend, in part, on the level of world trade: and I hope that over the year as a whole they will be maintained.

If so, the most uncertain element in demand is investment in stocks. The level of stocks at present does not appear to be excessive in relation to the level of activity. If, as I hope, there is reasonable stability in other sectors, we can hope for stability here also. Thus, while conditions at the end of 1954 are necessarily uncertain, there are good prospects that, over the year as a whole, production should be higher than in 1953.

Now for a word on monetary policy. In considering the measures which we need to take, I have made my dispositions this year, as I made them last year, in the knowledge that my Budget will have the support of monetary policy. A year ago I said that conditions in 1953 were likely to require broadly a continuation of the monetary measures then in operation.

That, in the main, is how it turned out. Interest rates generally fell during the year. But few have made the mistake of interpreting those movements as a change of direction in monetary policy; they have been generally and correctly viewed as evidence of the continuous adjustment that must go on if the monetary mechanism is to be kept in effective operation. I shall not offer any predictions on the role that monetary measures are likely to play in the coming year. Bank rates and the rates that depend on it will be kept flexible and free for use in either direction as circumstances may require.

My judgment is, therefore, that we shall continue to maintain a very reasonable balance in the economy. But I think also that we should not commit ourselves too far in advance. The economy should be well able to respond to any increases in demand, in particular of overseas demand, which may occur. Thus, there is no cause for making this Budget especially tough or more disinflationary. We need not impose harsh new taxes, since an increase in the level of taxation on initiative and enterprise would hold down and impede, rather than stimulate and spur on, our drive for productivity and exports.

On the other hand, as my analysis has shown, production is likely to be higher this year than last, and I judge that it would be unwise at present to stimulate purchasing power by remissions of taxation designed to increase personal consumption. Although each of us may have personal reasons for regretting this conclusion, a sober appreciation of our economy must conclude that it would be premature to adopt policies which might prejudice our future liberty of action. This is the more true while we are necessarily uncertain about developments in the United States of America and about our own ability to take the full measure of our competitors in external trade.

Moreover, the man in the street knows well that the real value of a Budget lies in its contribution to those things which are really important to him—full employment, stable prices, a steady growth of production. By all these tests, last year's Budget was successful. It must be the task of this Budget of 1954 to carry on this good work, and as far as I can tell, at this moment in time neither tax increases nor major tax remissions are possible or called for.

While, this year, we should avoid a deficit on our final out-turn, we need not strain after any significant surplus. My judgment, therefore, is that this Budgetary policy will secure a continuance of the achievement which characterised the last financial year—a healthy balance in the economy as a whole. I shall make no changes for change's sake. So for the second year in succession I shall raise no new taxes. Such remissions or adjustments as I am now going to describe are necessarily concentrated on granting certain special claims to relief and on increasing the incentive to productive investment.

Like every Member of the Committee, I receive constant appeals for a more generous release of post-war credits. Behind many of these letters lie circumstances of personal distress which the payment of the credits, however modest they may be, would do a little to relieve. And even the Chancellor of the Exchequer must be moved by some of the individual cases which come to his notice.

And so I have searched my conscience yet again in this matter; in particular, I have considered once more whether payment of the credits might not be made in cases of hardship. But I have found no means by which genuine and continuing "hardship" could be defined for this purpose, at least without creating as many anomalies as it would remove. The question which really faces me, therefore, is whether some general release of the credits is now possible and advisable, over and above the existing arrangement whereby the credits are paid at the age of 65 for a man and 60 for a woman.

Let me remind the Committee of the circumstances in which post-war credits were originally introduced in 1941. During the debates on that year's Budget Resolutions, my predecessor, the late Sir Kingsley Wood, said in connection with the credits—and I quote his words:

'…one of our principal post-war problems will be to regulate the rate of expenditure under all heads, with a view to maintaining good employment over a prolonged period, without overdoing it, in the sense of facilitating more expenditure than we have physical resources to provide, and thus producing postwar inflation."—[OFFICIAL REPORT, 9th April. 1941; Vol. 370, c. 1662–3.]

The amount of post-war credits outstanding at this moment is about £564 million, very widely distributed among all sections of the people.

In an economy of the kind which I have just described to the Committee— an economy on a pretty even keel, with no immediate prospect of any lack of consumer demand and no immediate need for any large stimulation of individual purchasing power—can I, or can any responsible Member of this Committee, honestly take the view that the time is ripe for the release of the credits on anything approaching this scale? The answer is, I fear, "No, not yet." It is therefore my duty to consider what is practical and realistic.

But although it is not possible for me to propose, as yet, any general release of the credits, even for particular groups of people, there is one type of case with which I can deal—the more gladly since it is a case in which the present law is often represented as producing injustice and anomaly. I wish to remove a deeply felt grievance that a family is often, under the present law, deprived by death of a reasonable expectation of having the benefit of the credits in a short time. This point has been put by the hon. Member for Sparkbrook (Mr. Shurmer) and many other hon. Members in the course of our debates.

At present if an individual dies under the age of 65, or 60 if a woman, the credits can be paid to a beneficiary under his will or intestacy only when the beneficiary becomes 65 or 60, as the case may be. I now propose to give the beneficiary also the right to claim payment of the deceased person's credits when the deceased person would have reached the required age had he or she lived. My proposal will, in addition, allow payment where a man has died over the age of 65 without actually claiming his credits.

It will not, of course, be possible to make payments under my proposal until after the Finance Bill becomes law; details of the arrangements will be announced as soon as they have been worked out. There will, at the start, be a large number of people who will become entitled to claim at the same time, and dealing with all these claims may have to be spread over a period. The claims will be paid in cash; but I ask all who get this money not to spend it unless their need is really urgent, but to put it into National Savings if they can. This proposal will add £19 million in the first year, and £2 million a year thereafter, to the payments of about £17 million a year which are already being made, below the line, under existing arrangements.

I will deal next with the few adjustments I propose to make in the field of indirect taxation.

I am aware of the need for some modification of the Entertainments Duty. Most of the revenue from this duty comes from the cinemas, which account for some £37 million out of a total, of £44 million a year. The maintenance of this revenue depends on the ability of the cinemas to provide the public with the standard of comfort and service which they have come to expect; this is the more important now that they have to compete with television.

Remembering the undertaking which I gave during the debates on the 1953 Finance Bill, I have examined very carefully the statistics showing trends in admissions and takings over the past few years; and I have been impressed by the difficulties which many cinemas have recently been experiencing as a result of increasing costs which are not matched by increasing receipts. Right hon. and hon. Members on both sides of the House have drawn my attention to cases of this kind in their constituencies.

I have accordingly decided to make some reduction in the Entertainments Duty on admissions to cinemas. The cinema exhibitors have represented to me that, in order to maintain their cinemas in good order and to keep pace with technical developments, they need to be relieved of duty to the extent of £7 million a year. I do not think it necessary to go as far as this, and in any case, I could not afford to do so.

The changes which I propose to make will cost the Exchequer about £3½ million in a full year. They will mean reductions in duty ranging from ½d. to 1½ per admission and will result in some improvement in the form of the scale. Full details of the new scale will be given in the White Paper.

There is no reason why cinema proprietors should not use this relief to reduce admission prices, where they can afford to do so. But I recognise that the industry in general will need the money, both to enable exhibitors to maintain the amenities of their cinemas and the attractions of their programmes, and to assist the revenues of producers. It is on these things that the prosperity of both the producing and exhibiting sides of the industry, and of the men and women employed in it, depend.

I have also been keeping a careful watch on other entertainments, particularly sports, as I undertook to do in the debates on the Finance Bill last year. I find that there has been some further deterioration, and I have decided that a measure of relief is called for. These other entertainments, mainly sports and the living theatre, already pay/lower rates of duty than cinemas; but I consider that relief to the extent of ½d. per admission is justified in present circumstances.

I am therefore reducing both the first and second scales of Entertainments Duty at a cost of £450,000 in a full year. This should help to put the finances of the football clubs, particularly the smaller ones, on a sounder footing. The total cost of those changes will therefore amount to about £4 million in a full year. They will operate from 30th May and the cost in the present financial year will be £3½million.

I am also raising the Customs duty on imported chicory by 5s. 9d. a cwt. Full details of the change are given in the White Paper. This increase in duty is not concerned with revenue considerations. It is to give support and protection to the chicory growers in this country which have been shown to be necessary. The new rate will operate from 7th April.

On this occasion, as I said some time ago, I do not propose making any changes in the rates of Purchase Tax. I gave due notice of this, and I do not regret the action which I took. But one of the Resolutions to be laid before the Committee this afternoon will enable certain defects in the legal machinery of the tax to be remedied.

I also propose to continue for five years the Key. Industry Duty which would otherwise have come to an end next August.

In the field of Inland Revenue there are some details to which I wish to refer. I propose, first, to counter a device whereby company reconstruction has been used to obtain taxation advantages. The essence of the proposal is that, as from today, the provisions of the Income Tax Acts relating to the cessation of one trade and the setting up and commencement of another shall not apply in cases "where three-quarters or more of the interest in the trade belonged to the same persons before and after the change.

I undertook last year to review anomalies in the Estate Duty, particularly anomalies arising in connection with what is known as the "assets basis" of valuation for controlling interests in private companies. Proposals for dealing with a number of these will appear in the Finance Bill. The Bill will also make provision for cases where part of a controlling shareholding, which has been valued on the assets basis, is sold to an independent purchaser; my proposal here, in broad terms, is that the Estate Duty valuation of the shares actually sold shall be brought into line with the sale price. The general principle of the assets basis, however, must, in my view, be maintained.

Nevertheless, I think that business assets are a type of property on which the Estate Duty can bear with special severity, particularly in the case of family businesses, whose traditional activities mean so much for the stability of our social and industrial life. Accordingly, where industrial premises or plant and machinery are used for the purposes of a trade carried on by the deceased—or, where the assets basis applies, by the deceased's company —the Estate Duty on these assets will be reduced by 45 per cent. This is the rate of relief which is already given in respect of agricultural land. This is a reform which hon. Members have often pressed on me in Finance Bill debates. I estimate the cost of the relief at £½million this year and £1½ million in a full year.

I have also examined a considerable number of anomalies, and alleged anomalies, in other parts of the Estate Duty field, though I have not been able to cover the whole subject this year. For example, the principle of aggregation of free and settled property has come in for a good deal of criticism on the ground of the hardship which it can cause to the deceased's family in certain circumstances. There is already a provision under which, broadly speaking, the deceased's own property is not aggregated with settled property if it is under £2,000. I propose to raise this figure to £10,000. I believe that with this amendment the great bulk of the hardship cases will be eliminated. This concession will cost £125,000 this year and £250,000 in a full year.

Lastly, I propose to deal with the doubts and anomalies which have arisen in regard to the treatment of policies of assurance which do not form part of the deceased's own estate.

I propose also to implement some more of the minor reliefs recommended by the first Tucker Committee. The second Committee which was set up under Mr. Millard Tucker's chairman- ship to deal with the taxation treatment of provisions for retirement has also now reported. I should like to thank Mr. Tucker and his colleagues for the difficult and valuable work which they have done on this complicated branch of the tax code.

There has not been sufficient time since the publication of the Report for me to reach any conclusions on the complex issues involved. In any event, the cost of the proposals would make it impossible for me to implement them in present circumstances. I shall not, therefore, propose this year any change in this part of the Income Tax system.

I now wish to end, as I began, with our primary need: that is, to improve our competitive power. In my survey of last year I have already commented on the inadequate level of investment by private industry. Our rate of industrial modernisation is strikingly less than that of America, and it seems probable that the Germans are now moving ahead of us. We shall not long continue to compete successfully in the export field with these, our principal rivals, unless our plant and equipment is completely up-to-date.

In accordance with my pledge last year, I have reviewed the whole question of company taxation. I have tried to devise some fresh encouragement to industry to put money into productive investment. This is the more essential since the physical and financial resources at our disposal are now sufficient to allow a substantially higher rate of investment than we are undertaking. Last year I restored the initial allowances to 20 per cent. This was a step in the right direction, but a limited one, since its effect is essentially that of an interest-free loan. As the cash resources of companies increase, this incentive becomes of less importance.

After considerable reflection, therefore, I have decided to take a further step, and to replace, subject to a few exceptions, the present initial allowances by a new system, which I call investment allowances. At present, the cost of investment in plant, machinery, industrial building or mining works may be offset against gross profits during the life of the asset by means of depreciation allowances. The initial allowance merely anticipates a part of the annual allowances, so that tax liability is less in the year in which investment takes place, but may be larger later on.

The new investment allowance will do more. It will give a tax-free allowance equal to a part of the cost of investment in the assets which I shall describe as qualifying for it. It will be given in addition to the full annual depreciation allowances. Thus, the initial allowances gave some extra help in the year in which the investment was undertaken, but at a cost of smaller allowances for that investment in later years. In contrast, the new investment allowance gives similar help in the first year, but with no reduction in subsequent allowances.

In general, the field over which the new investment allowance will operate will be the same as that of the initial allowance, which applies to plant and machinery generally and to new industrial buildings and mining works. But in view of the purpose of the new allowance, which is to encourage fresh investment, and of its nature, which is to give a tax-free allowance over and above the cost of the qualifying assets, there must be both additions to, and deletions from, the initial allowance list.

I propose that agricultural buildings and also plant and buildings used for scientific research, neither of which attracts initial allowances, shall rank for the new investment allowance. Investment in up-to-date buildings can assist farm production no less than industrial production, and the importance of scientific research to our economy can hardly be over-estimated. The new allowance should also help the shipping industry to carry out the big replacements which are necessary in the years ahead, and thus to maintain its vital contribution to our economy.

On the other hand, I do not think that this tax-free benefit should be available either for secondhand plant or machinery which does not represent new investment, or for ordinary motor cars which can and often do serve both business and private purposes. These assets will, however, continue to rank for the existing initial allowance at 20 per cent.

I propose that the new investment allowances shall apply, in the case of qualifying assets, to capital expenditure which is incurred—that is, which becomes due and payable—after today. In respect of expenditure on such assets, the initial allowance will in general cease from today. The rates of investment allowance will be 20 per cent, for expenditure on new plant and machinery and new mining works and new scientific and research work, and 10 per cent, for new industrial and agricultural buildings.

For plant, machinery and industrial buildings, these are the same as the existing rates of initial allowance, but they will be more favourable in the long run. The 20 per cent, investment allowance for mining works is not immediately so favourable as the existing initial allowance of 40 per cent. But since it will be given over and above allowances up to the cost of the works, it will practically always be better in the long run. However, I will allow any mining undertaking to choose between the new investment allowance and initial allowances at the 40 per cent. rate. There will have to be provisions safeguarding the new allowance from abuse. But these and other details must wait for the Finance Bill.

The cost of changing from initial allowances to investment allowances will be negligible in 1954–55, and about £4 million in 1955–56. Thereafter, the cost will increase year by year, and although the actual amount will, of course, depend on the level of new investment, I expect it to reach a considerable figure in the future. But in so far as this new allowance succeeds in its object of creating additional assets, those assets will, of course, be yielding additional revenue for the country, for their owners and for me.

Let me now make the final review of our national accounts. The Committee will already have realised that my proposals, which yield a surplus of £10 million, will still leave the Budget as it should be this year, broadly in balance. The estimate below the line will, it is true, have to take account of the concession on post-war credits.

But, in general, the changes which I have proposed have been much fewer and less spectacular than last year—deliberately so, for the reasons which I have already given. Just as, in 1952, I introduced an emergency Budget, and last year, an incentive Budget, so, this year, I am proposing a carry-on Budget, a Budget conceived as reaffirming our basic policies, rather than as marking any major change of emphasis or direction. That I can, with good conscience, do so is a tribute to the achievement of the measures which I introduced last year. They have brought us a good way along our road; they should be given the chance to carry us still further. Moreover, it would have been the easier and —I say this quite openly to the Committee—perhaps the more agreeable course to make sweeping reductions in taxation. But substantial tax remissions, would, in fact, have been premature, and unjustified in our present circumstances.

It is the duty of the Chancellor of the Exchequer, at such a time as this resolutely to reject temptations of this kind, and not to concede, to either the hopes or the fears of the future, what a dispassionate judgment of our economic prospects does not immediately require. But, although the scope for change was less this year than previously, I have tried to distribute what I can fairly, to ease some anomalies which have been felt to be unjust and undignified, and to enlarge, in a slightly novel way, the incentives to which industry responds. And I repeat that if, later in the year, circumstances should so demand, we shall not hesitate to take more radical measures at a later date.

It must, then, be a vigilant, poised and confident Britain which turns to face the new financial year—with an economy resilient to absorb whatever shocks and setbacks the fluctuations of world trade may inflict on us, but also alert to reach out for each and every opportunity for expansion and enterprise which circumstances may offer, and our own initiative may devise. So resolved, we have nothing to fear, and much to hope.

1. Entertainments (Excise)

Motion made,

That as respects payments for admission to entertainments held on or after the thirtieth day of May, nineteen hundred and fifty-four, the three scales of entertainments duty provided for by section two of the Finance Act, 1952, shall be those set out in the Tables at the end of this Resolution.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

4. Purchase tax (Miscellaneous amendments)

Resolved,

That the law relating 10 purchase tax be amended as respects—

(a) goods held by a person who ceases to be required to be registered on or after the first day of May, nineteen hundred and fifty-four.

(b)the operations which are to be treated as processes of manufacture,

(c)the treatment of unfinished or incomplete goods as if they were finished and complete,

(d)the conditions on which persons may hold certificates of registration or enjoy benefits corresponding to those accorded to persons holding certificates of registration,

(e) the registration of persons who manufacture goods to be let out on hire,

(f) any matters incidental or supplemental to the foregoing amendments,

and that the extent and incidence of the tax may be varied so as to give effect to such amendments.

5. Charge of income tax for 1954–55

Resolved,

That income tax for the year 1954–55 shall be charged at the standard rate of nine shillings in the pound and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess over two thousand pounds as Parliament may hereafter determine.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

6. Income tax ( Initial allowances)

Resolved,

That any Act of the present Session relating to finance, in connection with any further provision for income tax allowances in respect of capital expenditure on new assets, may impose restrictions on the making of initial allowances under Part X of the Income Tax Act, 1952, to prevent duplication with the new allowances or otherwise, and may amend that Act to provide for cases where no initial allowance is made, whether or not in consequence of any such restriction.

7. Income tax ( Company reconstructions)

Resolved,

That it is expedient to authorise all such charges to income tax (including charges for past years of assessment) as may arise from any provision as to changes in the persons carrying on a trade which is being or has been carried on by a body corporate, or in the persons carrying on activities comprised in a trade which is being or has been carried on by a body corporate.

8. Income tax ( Income against which losses and capital allowances may be set)

Resolved,

That any Act of the present Session relating to finance, if it enables business losses, and allowances under Parts X and XI of the Income Tax Act, 1952, to be carried back against income of previous years on the cessation of a business and in other cases, or enables such allowances to be set off against general income, may contain provision to prevent duplication of the relief whether in favour of the same or another person.

9. Income tax ( Treatment for capital allowance purposes of demolition cost)

Resolved,

That it is expedient to authorise all such charges to income tax as may arise from any change in the way in which demolition costs are to be treated for the purposes of Parts X and XI of the Income Tax Act, 1952.

10. Income tax ( Effect of certain sales on capital allowances, etc.)

Resolved,

That as respects allowances and charges under Parts X and XI of the Income Tax Act, 1952, for the year 1954–55 and subsequent years of assessment, provision shall be made for securing—

(a) that an election may not be made under paragraph 4 of the Fourteenth Schedule to that Act (which relates to sales between companies under common control and other cases) if any of the parties to the sale is not resident in the United Kingdom at the time of sale, but except for that the Schedule shall have effect in relation to a sale notwithstanding that it is not fully applicable by reason of the non-residence of a party to the sale or otherwise;

(b)that the operation of paragraphs 3 and4 of the Schedule shall not be restricted to cases where the property is sold at a price other than that which it would have fetched if sold in the open market.

11. Profits tax ( Charges consequential on income tax amendments)

Resolved,

That it is expedient to authorise all such charges to the profits tax (including charges for past chargeable accounting periods) as may result from amendments of the law relating to allowances, deductions or charges for income tax purposes.

12. Estate duty ( Valuation of certain company shares or debentures and assets)

Resolved,

That the provision made by section fifty-five of the Finance Act, 1940, for valuing shares or debentures by reference to the value of the company's assets ought to be amended, notwithstanding any resulting charge to estate duty, and section fifty of the Act ought also to be amended so as to provide that in valuing a company's assets (whether for the purposes of section fifty-five or of section forty-six of the Act) an allowance may in certain circumstances be made for taxation falling on the company after the death.

13. Estate duty ( Aggregation of settled property with other property)

Resolved,

That it is expedient to restrict the provision made by subsection (3) of section sixteen of the Finance Act, 1894, as amended, for not aggregating settled property with other property.

14. Estate duty ( Policies of assurance)

Resolved,

That new provision ought to be made for charging estate duty on policies of assurance on the life of the deceased.

15. Estate duty ( business assets)

Resolved,

That, if any Act of the present Session relating to finance provides for charging estate duty at reduced rates in respect of particular types of business assets, it may in connection therewith contain provision as to the manner of apportioning the liabilities of the business between the assets thereof, notwithstanding any resulting increase in the charge on some of the assets.

16. Amendment of law

Motion made and Question proposed,

That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance, so, however, that this resolution shall not extend to giving any relief from purchase tax otherwise than by making the same provision for chargeable goods of whatever description or by reducing any of the several rates of the tax generally for all goods to which that rate applies.—[Mr. Butler.]

5.10 p.m.

5.13 p.m

5.33 p.m.

6.6 p.m.

6.26 p.m.

6.49 p.m.

7.8 p.m.

7.20 p.m.

7.45 p.m.

7.58 p.m.

8.17 p.m.

8.32 p.m.

9.1 p.m.

9.14 p.m.

9.38 p.m.